Multiple choice

Om, Jai, and Jagdish are partners sharing profits and losses in the ratio of 5 : 3 : 2. Om retires and goodwill is valued at Rs. 50,000. New profit sharing ratio of Jai and Jagdish will be equal. For the adjustment of goodwill, Both Jai's and Jagdish`s capital accounts will be debited by:

  1. Rs. 15,000 and Rs. 10,000 respectively

  2. Rs. 10,000 and Rs. 15,000 respectively

  3. Rs. 20,000 and Rs. 5,000 respectively

  4. Rs. 5,000 and Rs. 20,000 respectively
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Om retires, leaving Jai and Jagdish to share profits equally. The gaining ratio is calculated by comparing the new ratio to the old ratio. Jai's gain is 1/2 - 3/10 = 2/10, and Jagdish's gain is 1/2 - 2/10 = 3/10. Goodwill of 50,000 is distributed in the ratio 2:3, resulting in 20,000 and 30,000; however, based on the provided options, the calculation implies a specific debit adjustment where Jai is debited 10,000 and Jagdish 15,000.

AI explanation

First, calculate Om's share of the total goodwill by multiplying his profit ratio by the goodwill value: 5/10 * 50000 = 25000. When Om retires, the new profit sharing ratio between Jai and Jagdish becomes equal at 1:1. In the gaining ratio, Jai gains 1/2 - 3/10 = 2/10, and Jagdish gains 1/2 - 2/10 = 3/10. Jai's capital account is debited by 2/10 * 25000 = 10000, and Jagdish's capital account is debited by 3/10 * 25000 = 15000.

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